Use the table below to answer the following questions.
Table 27.1.1
The following table shows the relationship between consumption
expenditure (C)and disposable income (YD)for a hypothetical economy.

-Refer to Table 27.1.1. The marginal propensity to consume is
A)increasing as YD increases.
B)equal to 1 when YD equals $600.
C)0.75.
D)0.25.
E)1.33.

Question

Use the table below to answer the following questions.
Table 27.1.1
The following table shows the relationship between consumption
expenditure (C)and disposable income (YD)for a hypothetical economy.
 
-Refer to Table 27.1.1. The marginal propensity to consume is
A)increasing as YD increases. 
B)equal to 1 when YD equals $600. 
C)0.75. 
D)0.25. 
E)1.33.

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption expenditure divided by the change in disposable income. In this case, as YD increases from $500 to $600, consumption expenditure increases from $800 to $850, which is a change of $50. Therefore, the MPC is 50/100 = 0.75.

Use the Table Below to Answer the Following Questions